Tackling Mauritius’ Vulnerabilities

Editorial

Someone in power should initiate the action

Everybody will not remember it. In 1979, the price of oil quadrupled to $40 a barrel. At that time, we were heavily dependent on sugar exports for our foreign exchange earnings with which to meet the cost of our imports, including the import of oil. Other import prices went up along with oil. This resulted in an almost complete run-down of our foreign exchange reserves. We had no money with which to pay for our essential imports. To bridge the gap, we went for borrowing funds on international markets at exorbitant interest rates. Of course, we repaid those international commercial loans subsequently but the situation proved to be so nerve-racking that it contributed to Labour’s electoral defeat in 1982.

We are not immune from such exceptionally high international price rises today. There are signs that oil prices have been going up again on international markets, having reached $90 a barrel lately. This escalation from the $60 level of yesterdays is partly fuelled by the same speculation that had taken the price to nearly $150 a barrel in 2008. Costly hedging was then undertaken much to our loss. But the core reason for oil price rise today is pressing ongoing demand from China which increased by more than 12% last year. This pressure on demand is not abating very soon. The implication is that we have to brace ourselves to face it although we have today a much higher level of foreign exchange reserves than we had in the late 1970s and early 1980s. Had we achieved some degree of energy independence, however, we would be overcoming a source of vulnerability to which we have been subject for a long number of decades. It would not be a bad thing to shift up from theory and get into practice.

But oil is only part of the equation. Our current account of the balance of payments is in structural deficit because we are persistently importing much more than we are able to export. The problem is not necessarily the deficit itself but the size of it: it is big and increasing. For example, a sustained international oil price increase (with negative impact on our external competitiveness) without a parallel increase in the prices and volumes of our own exports will heighten the risk. We could also be trying to cut down on unnecessary imports that become junk very quickly and are probably rejects from other countries that don’t have a market for such cheap and short-lived items. While the public is free to buy up things having a short duration, importers have a role in it by not putting on the local market all sorts of trivia and substandard products. The Chamber of Commerce and Industry may have a role to cleanse imports of its junk content by educating both importers and consumers.

Environmental Pollution

This should make our international trade more healthy and sustainable, the more so if the Chamber could encourage local producers to put up import substitutes of a high standard raising consumers’ preferences to more enduring and manageable products. Look at the havoc and sheer ugliness the introduction of plastic bags, cans and containers has done to the ecological sustainability of the country’s environment. Instead of being content to collect revenue in the name of trade liberalisation, the government should have banned the import and processing of such dangerous things outright. This is because as time goes by, it becomes more impossible to reverse the accumulating trend of such nuisance. Poor states in India have banned within prescribed peripheries the use of plastic. It seems we cannot afford to follow their example. This kind of risk-taking on the country’s future in our case is not justified by any prescription to keep budget deficits within limits. This is the wrong emphasis.

A beginning has been made by the decision taken not to allow CT Power to operate at Pointe aux Caves. Some resounding similar further decisions in the same direction would be a correct signal to arrest the degradation that has already set in. A lot of the future working of Mauritius depends on keeping our pristine environment intact and taking action to ensure that no one is allowed to cut corners. Are we conscious of this responsibility?

What about efficient water management?

It is well known that life cannot be sustained beyond a limited number of days in the absence of clean drinking water. The dangerously low level of water in our reservoirs shows how far we have allowed the water situation to deteriorate. Granted that we have been facing an exceptionally rainless period lately but we have been in this condition before, enough to teach us that we should not have taken the matter lightly. It is quite possible that thanks to a good supply of rains, we might overcome the failure without running into catastrophe. That, however, is not the end of the matter. We may become complacent once again and let things drift until we are once again hit by the same drastic situation. This is certainly not the way to manage a specific area in which we could be particularly vulnerable as it is being realised today. In fact, it is this element of “management” from a policy angle that has been so sorely absent. The consequence is that we are nearly on our knees. Every area of economic activity is threatened should the situation persist. Had amateurism given way to professionalism, we would not have had to pray fervently the rain gods to grace us with a few drops. It is amazing how our nonchalance keeps bringing us to the brink of disaster. It is a sharp turnaround in the style of public administration that can free us from perpetuating situations in which Damocles’ sword is hung up on our heads.

Other Interlocking Areas need attention too!

We do not want to extend this kind of analysis to other fields such as education, food self-sufficiency, energy, poorly planned urbanisation, badly designated infrastructure. Facts speak for themselves. You just have to go and see the amount of (hopefully reversible) distortion that has been taking place. Instead of setting high standards of compliance by ourselves, we have been content to find pride in what others have to say to flatter our egos. What do they know of our constraints? They will condemn us tomorrow if things misfire just as they are heaping praises on us currently. As far as we are concerned, it is for us to keep our house in the highest pecking order, not just to please those who manage our mark sheets.

Is our image-building really in our hands?

We have a deeper role to set the milestones for tomorrow and stick to rigour and discipline. If only the hard hit our reputation has taken on this unfortunate murder of a guest in one of our hotels could serve as a reminder! How great our international standing has been thus far? Yet, it was sufficient for one incident like this one to make us face dire consequences.

You must see the tons of adverse publicity this event has evoked in the western media. Yet, what can we do? It may be that economic power would be shifting to the east but world media power remains heavily concentrated in the west. It is likely to remain dominant in times to come because it has earned goodwill far beyond anybody else. It can make or unmake key areas of our economic activity and it were best we kept this in mind. No matter what you do or say, the western media carries far more persuasion and influence than media structures that shift loyalties like weathervanes or are subject to the whims and caprices of dirigiste regimes in other parts of the world.

Has not part of the media in India portrayed, whenever it wanted or suited the purpose of certain lobbies over there, our financial sector as a conduit for wrongdoers? Have we not then been put on the defensive despite our best efforts to cooperate, to the point of thinking that the double tax agreement treaty which is the cornerstone for much of our offshore financial services ran into the danger of being unilaterally repudiated with catastrophic effect on our economic activity? This is unfortunately the reality we have to cope with.

Action

Seeing the underdog position from which we have to fight in this arena, it would be wise never to stop taking precautions to safeguard our acquired gains. This truly is the measure of our success: how well have we identified our vulnerabilities and taken pre-emptive action to forestall all or any adverse consequences?

Someone in power should initiate the action, the sooner the better.

* Published in print edition on 21 January 2011